When and Why Do Innovation Policies Change? A Performance Feedback Perspective

Abstract

National innovation is important for driving a country’s long-term economic growth and identifying social problem solutions. However, while some countries maintain favorable policies for promoting innovation, some seem to fall behind. In addition, a country’s innovation policies may change over time. In this study, we examine when and why policy-makers change innovation policies. Specifically, we draw on performance feedback theory to theorize how aspirations for national innovation may affect a country’s innovation policies. Based on the data of member states of the Organization for Economic Co-operation and Development (OECD), we find that when national innovation output is below the level of aspiration, policy-makers improve policies to attract private R&D investment (expand public R&D investment) if national private R&D investment (national public R&D investment) is also below the aspiration levels. However, the shortfalls in national private or public R&D investment alone do not motivate policy-makers to take any action. Such findings provide strong implications for policy-makers and innovators in both the private and public sectors.